Which of the following statement is FALSE?
Depreciation doesn’t provide fund for replacement.
The correct answer is option 2. Depreciation does not provide funds for replacement, it is an expense recognized over time for the wear and tear or usage of fixed assets. Depletion, on the other hand, is associated with the reduction in the availability of natural resources such as minerals, which diminishes as they are used. The false statement is that depreciation provides funds for replacement, which it does not directly do.
Important Questions from Depreciation, Reserve & Provision
A state of deterioration, damage done to a building or other property during tenancy can be referred to as:
Which of the following methods of depreciation is prescribed by the Income Tax Act, 1961?
________ method is especially suited to mines, oil wells, quarries, sandpits and similar assets of a wasting character.
______ system of depreciation is followed in case of those assets which are of small values or where the life of the asset cannot be ascertained with certainty.
If a machine (having a scrap value of Rs.1,000) is purchased for Rs.10,000 and it has an effective life of 10 years of 1000 hours each, what will be the amount of depreciation per hour?
